The fast approach of March 31st signals yet another time for making sure your business is in good financial shape to make the most of any opportunities that arise during the next financial year.  

Is your cash flowing?

A vital part of any business is cash flow. It seems obvious that to survive in business, you need to keep the cash coming in.  However, this doesn’t just mean keeping the sales coming.  More often it actually means collecting the debts that are due to you, when they are due.   For the sake of your company’s survival and the job security of your employees (and your own credit rating), overdue debts should be identified early  and dealt with promptly.

While the ideal way to deal with bad debts is to not have any, in reality, every business sometimes has bad debtors.  The following 6 tips explain how to get paid in full and on time:

  1. Implement good systems. Reducing outstanding debtors is about having the right systems in place. These systems will include regular book keeping and stringent credit checking. Policies such as payment in advance or payment of deposits should be strictly enforced. Proper agreements, including where appropriate personal guarantees as security for payment, should be obtained from the outset.
  2. Gather relevant information. Find out as much information about a customer as possible prior to giving credit. Even ask for a drivers license to check that the person is who they say they are, and make a copy for your files. Ask for at least two phone numbers and don’t accept a mobile number only, as these are very easily changed.
  3. Invoice customers promptly. You can’t collect debts that you haven’t invoiced. Don’t leave billing for weeks after the job is done. Put systems in place that will allow you to prepare an account and deliver it to the customer as soon as the relevant transaction is finished.
  4. Maintain a good rapport with your debtors and encourage regular communication with them. Keep full notes on any promises to pay as these are often vital to proving liability in Court if it later comes to that.
  5. Don’t be afraid to ask direct questions. You need to know about any reasons why a customer might be struggling with their accounts. Remember that their viability might affect your viability as a business.
  6. Act quickly. The quicker you chase up a debt the more likely it is to be paid.  If the trail goes cold you could go to the bottom of a large pile of bills.  Get your lawyer involved promptly. Many people are comfortable to put off a creditor until they’re shown that the creditor is serious enough to take legal steps.